BUSINESS PLAN

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BUSINESS PLAN

  1. 1. BUILDING AN AGRIBUSINESS OR SMALL BUSINESS PLAN Document Conventions Type Description Underlined Words Hyperlinks to sections in the document and Internet sites • Bulleted items indicate a list of related items Italic Words Subsections of information A, B, C Numbered items indicate a list of related items Tips on using this document in Electronic Format: • Click on the blue links or purple links to find a description of the word, a sample of a worksheet or an Internet link to more information. • Click on the blue arrow button or the Back button to return to your place in the document (these buttons can be found at the top left of the screen). • Click on the gray box to type in your data. • Click on the down arrow to go to the next page or click the up arrow to go back a page in the document (these buttons can be found at the bottom right of the screen). 1
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BUSINESS PLAN TABLE OF CONTENTS INTRODUCTION........................................................................................................................................................5 Elements of a Business Plan – An Overview..............................................................................................................6 COVER SHEET............................................................................................................................................................6 EXECUTIVE SUMMARY..........................................................................................................................................7 BUSINESS AND INDUSTRY DESCRIPTION.........................................................................................................8 Legal Structure ..........................................................................................................................8 Business Name ..........................................................................................................................8 PRODUCT OR SERVICE DESCRIPTION..............................................................................................................9 MARKET DESCRIPTION..........................................................................................................................................9 Market Size ................................................................................................................................9 Market Segmentation..................................................................................................................9 How is the market for your product divided? ...........................................................................................................9 Target Market .............................................................................................................................9 Competition ................................................................................................................................9 Industry Trends.........................................................................................................................10 Market Share Data ...................................................................................................................10 Distribution Patterns..................................................................................................................10 MARKETING PLAN.................................................................................................................................................10 Pricing Strategy ........................................................................................................................10 Sales/Distribution Strategy .......................................................................................................10 Promotion Strategy ...................................................................................................................11 Marketing Strategy ...................................................................................................................11 Service and Warranty Policies .................................................................................................11 MANUFACTURING AND OPERATIONS PLAN.................................................................................................11 Facilities and Improvements .....................................................................................................11 Plant Location ..........................................................................................................................11 Labor Force ..............................................................................................................................11 Management Team ..................................................................................................................12 Personnel Plan..........................................................................................................................12 Insurance .................................................................................................................................12 SUPPORTING DOCUMENTS.................................................................................................................................12 Required Information: ...............................................................................................................12 Optional Information:.................................................................................................................12 FINANCIAL PLANNING.........................................................................................................................................13 Important Assumptions..............................................................................................................13 Source of Funds .......................................................................................................................13 Use of Funds ............................................................................................................................13 Balance Sheet Forecast ..........................................................................................................13 Pro forma Income Statement ...................................................................................................14 Pro forma Cash Flow Analysis .................................................................................................14 Schedule of Liabilities ...............................................................................................................14 Personal Finances ....................................................................................................................14 Registering your Business..........................................................................................................................................14 3
  4. 4. State Registration......................................................................................................................14 Local Registration (Assumed Name Certificate) ......................................................................15 Tax Responsibilities....................................................................................................................................................16 Federal Taxes...........................................................................................................................16 State Taxes...............................................................................................................................16 Local Taxes...............................................................................................................................17 REFERENCES AND RESOURCES........................................................................................................................18 Small Business Development Centers (SBDC).........................................................................................................19 Small Business Administration (SBA)......................................................................................................................20 APPENDIX A: BUSINESS PLAN WORKSHEETS.........................................................................................................................22 YEAR...............................................................................................................................25 APPENDIX B: FINANCE WORKSHEETS......................................................................................................................................42 Appendix C: Tax Reference Table...................................................................................................................................................58 Appendix D: Employer Requirements............................................................................................................................................62 Appendix E:.................................................................................................................................................................70 Alternative Business Plan Formats...........................................................................................................................70 Sample Business Plans for Agricultural Producers ................................................................................................74 This page left blank....................................................................................................................................................75 APPENDIX F:.............................................................................................................................................................76 Glossary of Terms ......................................................................................................................................................76 APPENDIX G: Miscellaneous / Sample Forms..................................................................................................................................80 This page left blank. ..................................................................................................................................................81 This page left blank. ..................................................................................................................................................83 4
  5. 5. BUILDING AN AGRIBUSINESS OR SMALL BUSINESS PLAN INTRODUCTION The importance of a comprehensive, thoughtful business plan cannot be overemphasized. Much hinges on it: outside funding, credit from suppliers, management of your operation and finances, promotion and marketing of your business, and achievement of your goals and objectives. Before you begin writing your business plan, consider four core questions: • What service or product does your business provide and what needs does it fill? • Who are the potential customers for your product or service and why will they purchase it from you? • How will you reach your potential customers? • Where will you get the financial resources to start your business? A business plan precisely defines your business, identifies your goals and serves as your firm's resume. The basic components include a current and pro forma balance sheet, an income statement and a cash flow analysis. It helps you allocate resources properly, handle unforeseen complications and make good business decisions. Because it provides specific and organized information about your company and how you will repay borrowed money, a good business plan is a crucial part of any loan application. Additionally, it informs sales personnel, suppliers and others about your operations and goals. The Texas Department of Agriculture (TDA) developed this guide by drawing on the experience of many public and private business assistance programs. This business plan model can be used as both a guideline and a workbook as you prepare your business plan. The worksheets in the appendices can be completed, removed and used as part of your individual business plan. Be as complete as possible in preparing your plan. Insert additional pages if needed, and feel free to include any pertinent additional documentation. We have also added a glossary of terms for your benefit. If you need further assistance with your business plan, contact the Texas Department of Agriculture Rural Economic Development division through the Rural Assistance toll free line at (877) 428-7848. TDA has Rural Economic Development specialists that can assist you with the development of your rural business. You can find more useful information on TDA’s Web site at www.agr.state.tx.us. Please use the checklist at the end of the document to help assemble the necessary documents, records and contact information you will need in completing the Business Plan. 5
  6. 6. ELEMENTS OF A BUSINESS PLAN – AN OVERVIEW The following outline covers the basic elements of a business plan. However, the outline below is more applicable to a manufacturing business. Alternative outlines and links to samples for agribusiness and service businesses are available (see Appendix E). I.Cover sheet II.Executive Summary III.Business Plan Core A. Business and Industry Description B. Product or Service Description C. Market Description D. Marketing Plan E. Manufacturing and Operations Plan IV.Supporting Documents A.Required Information B.Optional Information V.Financial Plan A. Source of Funds B. Use of Funds C. Balance sheet forecast D. Break-even Analysis E. Pro forma income projections (profit & loss statements) F. Pro forma cash flow G. Schedule of Liabilities H. Personal Finances COVER SHEET The cover sheet, of course, should be neat and attractive. It should identify the business, its location (including county), telephone and fax numbers, e-mail and/or Web site address and where the principals can be reached. The person or group who helped write the business plan should also be identified. A sample cover sheet is provided at the beginning of Appendix A. 6
  7. 7. EXECUTIVE SUMMARY It is a good idea to include a brief summary of your business plan outlining the major ideas and opportunities of the proposed agribusiness or small business. If you are using your business plan to recruit potential investors or even to get credit with suppliers, it is very important that you allocate enough time to write an appealing, unexaggerated summary since this is probably the first thing the potential investor will read about you and your business. The summary should be written after you have completed the business plan, and it should be no longer than two pages. TDA suggests the following guidelines to ensure that all crucial elements are included in your executive summary. If you have additional information pertinent to the completion of your agribusiness or small business plan, feel free to include it. • Business Description - Include a description of the form of the business (i. e., sole proprietorship, general partnership, cooperative or corporation). Is the business merchandising, processing or service-related? Is it a new business, expansion or relocation? If it is an expansion or relocation, where is the business currently located? Trace the history of your business: when it was formed, how the products/services were chosen and developed and the role that each principal played in bringing the business to where it is today. • Product Description - Identify the product(s) that will be produced and/or sold. Identify any features that distinguish your product or service from those of your competitors. Also include a brief statement of your pricing strategy. • Market Description - Identify your customers, where they are located and how you intend to target and service them. • Competition - Identify your major and your nearest competitors. Identify your competitive advantage. • Location - Briefly discuss any area characteristics or other factors that may have influenced your decision to choose your specific location. Explain your major location concerns, including availability of transportation and utilities. • Facilities - Include a brief description of the type of facilities that you have or will need. Estimate the amount of land needed, square footage of buildings and any other information that fits your business. • Management/Personnel - Briefly describe any experience you and any other business principals have that would help you develop a successful business. Include a brief description of your key personnel and their duties. Indicate if any special training is needed, and if so will training be provided? Identify what your labor requirements will be during the first and second years of operation. • Financial Needs - Include an estimate of the total start-up or expansion cost for your business. From this, indicate the amount of funding desired and briefly summarize the amount and the use of funds. Also indicate what assets you will use for collateral and the equity to be contributed if such funding is provided. • Earnings - Indicate in dollars what estimated total market sales would be for the first three years that your agribusiness or small business is in operation. From this, indicate what your expected sales and profits are for the first three operating years. Sales and profits should be calculated on a worst-case, best-case and most likely scenario for each year. Also, we recommend providing sections in the summary for your specific Objectives, Mission and Keys to Success. For more information on Executive Summaries, be sure to review the sample business plans available at the Web site provided by the U.S. Small Business Administration and Palo Alto Software at www.bplan.com/samples/sba.cfm. 7
  8. 8. BUSINESS AND INDUSTRY DESCRIPTION (Appendix A, Worksheet I) In this section of the agribusiness or small business plan, describe the type of business that you are in or plan to enter. Identify and describe the product you are offering and to whom it is offered. Indicate your targeted region of operation. If the desired agribusiness or small business proposal is for an expansion, include a brief listing of your firm’s financial performance (sales, profits, return on equity) for the last three years of operation. If your company has incurred losses in the last five years, describe why they occurred and what measures you have taken to avoid such incidences in the future. Also include how your company has done since implementing these measures. Describe who the major participants in the industry are and how they are performing (including growth in sales and profits). From this, indicate how you believe you will fit in the industry. Identify any companies that have recently entered or left these markets. When and why? The first step in starting a business is to determine the basic legal structure of the business and to properly record the business name. This step is important when starting a business, since financial implications vary depending on which legal structure is selected. These range from corporation responsibilities for annual franchise tax fees to personal liability for business dealings as a sole proprietorship. The business name selected is the identifying and marketing component of the business. It should be given much thought and consideration. A professional tax consultant, accountant, and/or attorney should always be consulted before determining legal structure and business name. • Legal Structure There are several legal structures available for businesses operating in Texas. See the Glossary for definitions of the different structures, which include cooperatives, corporations, sole proprietorships, general partnerships, limited liability companies and limited partnerships, and contact the secretary of state’s office for more information. • Business Name Once the legal structure of the business has been determined, and if a separate business name will be used, the business name must be registered with the county clerk’s office and/or the secretary of state. For more information, visit the web site at www.sos.state.tx.us It is very important to do a thorough search when considering a business name. If a corporation and an unincorporated company have very similar names, neither automatically has the right to the name. If both parties have properly filed the Assumed Name Certificate, the courts will most likely have to decide this matter. Taking the time necessary to conduct the name research up front will help avoid legal costs after the business is opened and operating. 7
  9. 9. PRODUCT OR SERVICE DESCRIPTION (Appendix A, Worksheet II) In this section, describe the product/service that will be produced or offered for sale including any copyrights and/or patents. List all raw materials and supplied products that will be used to produce the final goods. Who will you buy your raw materials from? How much will materials cost? In what quantities will your products be produced? Include/emphasize any similarities or differences among your product and those of your major competitors. Explain how these similarities/differences will benefit your firm. It is very important that enough information be presented to convince possible investors that there is a market for your product. It is also important to provide enough information to show that your sales target can be met in the face of competition. MARKET DESCRIPTION (Appendix A, Worksheet III) • Market Size What is the present size of the market for the product you have or service you offer? Is it local, regional, national and/or international? Is it made up of consumers only, manufacturers, institutions, governments or others? Is the market expanding or contracting? You can gather information concerning your market from discussions held with potential distributors, dealers, suppliers, sales representatives and customers. Published data is also a good resource for learning about your market. Information can also be obtained using census data, industry data, trade associations or government sources. Much of this data may be available on the Internet, from government entities or trade associations. • Market Segmentation HOW IS THE MARKET FOR YOUR PRODUCT DIVIDED? • Target Market Define your target market clearly. Identify the major purchasers of your product or service and where they are located. Discuss how price, quality, service and personal contacts will influence your customers’ buying decisions. Do seasons affect your customers’ buying patterns and the offering of the product by the business? How do you plan to attract and keep your target market? What can be done to expand your market? What are the possibilities of exporting your product? • Competition It is very important that you make a realistic assessment of your major competitors’ strengths and weaknesses. Compare your products to those of your five largest competitors on the basis of price, performance, service, warranties and other features. How large are these competitors when you compare them to your business based on potential sales, number of employees and number of customers? What has been the recent trend in sales, market share and profitability? If your major competitors have not been doing well, explain why you expect to succeed. In completing this section, explain why customers buy from your key competitors. Explain why you think you can capture a share of their business. 9
  10. 10. • Industry Trends Identifying the industry trends will help you determine if the business you are beginning is in an industry that is prospering, stabilizing or declining. Explain at what stage of the product life cycle your business will be entering. Also explain why your product/service will capture a share of the existing market. • Market Share Data Estimate what percent of total sales and market share you think you can achieve. Base these estimates on your assessment of your customers and their acceptance of your product, your market size and your competitors. Your sales growth and your estimated market share should be related to the growth of the industry and its customers as well as your competitors’ strengths and weaknesses. • Distribution Patterns How will you get your product to your customers and potential customers? What are the advantages of the distribution methods you have chosen? MARKETING PLAN (Appendix A, Worksheet IV) The marketing plan should describe how you intend to meet your sales target. This plan should include a description of your sales and service policies. Pricing, distribution, advertising and promotional strategies should also be discussed. • Pricing Strategy Pricing is an important decision that must be made carefully. The price you determine must be “right” if you intend to penetrate the market, maintain your market position and produce the profits you project. Once a pricing strategy has been chosen, discuss the prices that are to be charged for your product and compare your pricing strategy with those of your major competitors. In your discussion, explain how your pricing strategy will allow you to secure/increase acceptance of your product, maintain or increase your market share, and at the same time, produce profits. Discuss the relationship between the price and the image you are trying to create. If your product price is higher than similar products, explain the reason for such a difference. What makes your product worth more? If prices are set below your competitors’ products, explain how you intend to do this and still maintain profitability. • Sales/Distribution Strategy In this section, describe the method by which you intend to sell and distribute your product. Will your product be available where your customers wish to purchase it? Do you intend to use your own sales force, sales representatives and/or distributors? What will be the mix between wholesale and retail markets? 10
  11. 11. • Promotion Strategy How do you intend to promote your product/service so prospective customers are aware of it? What type of advertising techniques will be used (i.e., mail, radio, television, Internet, magazines, newspapers, etc.) to help promote your product? • Marketing Strategy Your marketing strategy should include a list of the customers who will be targeted the heaviest. What method will be used to identify potential customers, and how will they be contacted? What feature of the product (price, quality, delivery, warranty, service, etc.) will be emphasized to generate sales? If your business has established markets, include letters of “intent to purchase” from each firm. • Service and Warranty Policies Briefly describe what type of service/warranty policy, if any, your company will offer. MANUFACTURING AND OPERATIONS PLAN (Appendix A, Worksheet V) Describe the manufacturing process (if applicable) involved in making your product. Describe the type of facilities, space requirements, capital equipment, plant location and labor force your company will need. For a processing business, discuss the type of purchasing, inventory control and production control policies that will be in force. How will you meet regulatory requirements? • Facilities and Improvements If you are already in business describe the facilities from which you are conducting business; include plant and office space, storage and land areas, machinery and other capital equipment. Discuss any plans to improve or add to existing plant space or to move facilities. Explain the type of equipment needed to improve the facilities and the cost. If your business is a start-up, how and when will the necessary facilities be purchased/acquired to start production? Indicate whether equipment and space will be leased or acquired, new or used. What size facility will be needed? What will such a facility cost? Indicate what amount (percentage) of the financing will be devoted to plant and equipment purchases. • Plant Location Describe your business location. Discuss the advantages and disadvantages of your firm’s location in terms of wage rates, labor availability, proximity to customers or suppliers, access to transportation and utilities. Don’t forget to address federal, state and local taxes and regulations, and zoning issues. In addition, identify any financial incentives provided by the city and/or county and the permits required. Attach a map of the site if one is available. • Labor Force Describe the labor market within the area. How many jobs will be created through the development of this business? What distance will workers be expected to travel to work? If the 11
  12. 12. skills of the labor force are inadequate, what type of training program will be available and for how long? See Appendix D for more details about your requirements as an employer. • Management Team This section should include a description of the key members of the management team and their duties. Resumes of these key individuals should be included in the appendix. Also discuss the organizational structure of the company and of the board of directors. • Personnel Plan • Insurance Include a list of all insurance policies that will be in force. Identify the issuing company, expiration date, coverage amount and deductible. Below is a brief list of some insurance policies to include: A.General liability B.Workers’ Compensation C.Property loss – all hazards D.Theft E.Product liability F.Vehicles owned and leased G.Other (specify) SUPPORTING DOCUMENTS Include any documents that help support statements already made in the business plan. • Required Information: A. Articles of Incorporation, Assumed Name Certificate, partnership agreement, etc. B. Bylaws C. Resumes of officers and board of directors D. Tax returns of principals for last three years E. For franchised businesses, a copy of franchise contract and all supporting documents provided by the franchisor • Optional Information: A. Letters of Intent to Purchase from prospective customers B. Letter(s) of commitment from other sources of financing C. Contracts with buyers D. Contracts with suppliers E. Feasibility study F. Personnel policies (Including Code of Ethics) G. Visuals or diagrams of equipment/facilities H. Business brochures or catalogs I. Letters of support J. Permits and licenses K. Copy of proposed lease or purchase agreement for facility space L. Other relevant information 12
  13. 13. FINANCIAL PLANNING No matter where you seek financing, you will be required to provide certain business and personal financial information. This information is very important to any potential investor to use in evaluating your business. The financial data helps investors determine the feasibility of your plan, the size of investment required and your ability to repay the debt. We recommend that three sets of income and cash flow projections be included in the plan, identifying a best-case, worst-case and most likely scenario. For financial planning, we recommend that you use an interest rate that is 1 or 2 percent higher than what you expect to be charged to allow for rate changes since many loans are made on a floating rate basis. • Important Assumptions What are you assuming about the economy and its impact on your growth? Changes in the consumer market? Access to financing? What do you expect your interest rate and other expenses, etc.? Source of Funds (Appendix B, Worksheet I) Summarize from your cash flow analysis (see sample in Appendix B) the amount of money needed over the next three years to carry out the development and/or expansion of your business. Indicate how much of this money you expect to obtain yourself (through investors, sale of stock, etc.) and how much you anticipate borrowing from banks, loan companies, finance companies, state agencies or other sources. If you plan to sell stock, describe the type, unit price and total amount of securities to be sold. • Use of Funds Investors are very interested in knowing how their money will be spent. Identify how this capital will be used. Show what amount will be spent on such things as product development, capital equipment, marketing and general working capital needs, etc. It is best to itemize your working capital requirements, including a list of capital equipment and supply needs. Balance Sheet Forecast (Appendix B, Worksheet II) The balance sheet shows the business assets, liabilities and net worth at any point in time. Investors and bankers look at the balance sheet for information such as debt-to-equity ratios, working capital, current ratios, inventory turnover and accounts receivable turnover. Forecasted balance sheets should be prepared at start-up (incorporating the requested financing), quarterly for the first year and annually for the next two years of operation. Break-even Analysis (Appendix B, Worksheet III) Break-even analysis is a tool used to determine when a business will be able to cover all its expenses and begin to make a profit. It is extremely important to know your startup costs, which provide you with the information you need to generate enough sales revenue to pay the ongoing expenses to run your business. A startup business owner must understand that $5,000 of product sales will not cover $5,000 in monthly overhead expenses. The cost of selling $5,000 in retail goods could easily be $3,000 at the wholesale price, so the $5,000 in sales revenue only provides $2,000 in gross profit 13
  14. 14. available for overhead costs. The break-even point is reached when revenue equals all business costs. To calculate your break-even point you will need to identify your fixed and variable costs. Fixed costs are expenses that do not vary with sales volume, such as rent or administrative salaries. These costs have to be paid regardless of sales and are often referred to as overhead costs. Variable costs vary directly with the sales volume, such as the costs of purchasing inventory, shipping or manufacturing a product. Pro forma Income Statement (Appendix B, Worksheet IV) Submit a 3 year income projection summary. The first year should be projected monthly. The second and third years should be projected annually. Be thorough with your expenses. It is better to understate your expected sales and to overstate your expenses. We recommend that any assumptions made to complete this section be defined on a separate page. A sample pro forma income statement is provided in Appendix B and may be used as a guideline. Pro forma Cash Flow Analysis (Appendix B, Worksheet V) The cash flow analysis shows all cash requirements, when the cash will be used and what the funding sources will be. A 3 year summary will be needed. The first year must be broken down on a monthly basis. Years two and three should be done on an annual basis. Schedule of Liabilities (Appendix B, Worksheet VI) Identify all of your existing debt, including term and collateral debt. Personal Finances (Appendix B, Worksheet VII) Lenders are interested in the personal financial stability of the individual(s) seeking financing. All principals and/or stockholders who own 20 percent or more of the business should provide the following information: A. Personal balance sheet less than 90 days old B. Personal cash flow statement less than 90 days old C. Schedule of personal liabilities. REGISTERING YOUR BUSINESS • State Registration All businesses operating in Texas as limited partnerships, registered limited liability partnerships, limited liability companies, corporations, professional corporations, nonprofit corporations and professional associations must register with the secretary of state. If a corporation will transact business under names other than that stated in the articles of incorporation, the corporation must file an Assumed Name Certificate with the secretary of state and with the county clerk in which the principal office and registered office of the corporation are located. (See next section for details on Assumed Name Certificates.) 14
  15. 15. For more information, contact the Secretary of State, Corporations Section, P.O. Box 13697, Austin, Texas 78711-3697, or on the Web at www.sos.state.tx.us/index.html. • Local Registration (Assumed Name Certificate) If the business will operate as a sole proprietorship or a general partnership, an Assumed Name Certificate or d.b.a. (doing business as) for each name (or deviation of that name) the business will use must be on file with the county clerk in each county where a business premise will be maintained. If no business premise will be maintained, it should be filed in each county where business will be conducted. Each county clerk office may use a different form; however, the information requested should be the same. Be prepared to provide the business name, mailing address, city, state, zip, expected period of operation, business type and owner information. Period of operation is the period of time the business will use the name. Ten years is the maximum length of time an assumed name filing is valid. However, if the name will be used for a period of less than 10 years, indicate this on the form. Note that names must also be renewed every 10 years. Business type refers to the legal structure of the business. Indicate whether the business will operate as a corporation, partnership, sole proprietorship, etc. Owner information is the name(s) of the owner(s), personal address(es) and signature(s). All owners’ signatures must be notarized. This service is sometimes offered at the county clerk’s office. The form cannot be filed until all owners have signed it and all signatures have been notarized. The following information will be helpful in filing the Assumed Name Certificate in the county the business will operate. First write down the name of the business you will be considering. Pay close attention to capitalization, spacing, punctuation, etc. Consider this carefully as this name will identify the business to the public. Next search the county records for that exact business name in the assumed name books or computer. An assumed name filing is valid for 10 years, so search records for the last 10 years to verify that the name is available. One book will not necessarily encompass one year of filings, so check the front of the book for dates. Some records are computerized; however, a computerized index may not contain 10 years of filing history. Use the computer for the period it covers, and then use the books for any of the remaining 10 years. If the business name has been used, look in the margin to see if it has been abandoned. If the name has been abandoned, it can legally be used again. Many county clerk offices will provide a name search service for a nominal fee. The whole search process will often be taken care of through the mail. Please contact the local county clerk for verification of their process. Finally, if the company name is available, fill out the assumed name form and have it notarized. Then file it with the county clerk’s office. The county clerk will keep the original Assumed Name Certificate, so be sure to request several certified copies (at least one for the bank and one for your business records). For filing fee information and accepted form of payment, contact the local county clerk’s office. Most county clerk offices accept cash, certified checks, or money orders. If processing via mail, send the forms by certified mail with a return receipt requested to verify receipt by the county clerk. 15
  16. 16. TAX RESPONSIBILITIES One key step for starting a business is to determine the federal, state and local tax obligations. The following sections briefly discuss each of these areas. It is strongly recommended that a professional tax advisor, accountant, and/or attorney be consulted before starting a business. Federal Taxes Information regarding federal income taxes, tax identification numbers, business tax credits and employment tax regulations may be obtained by contacting the following agencies: Income Taxes, Tax Identification Numbers, and Business Tax Credits Internal Revenue Service 825 E. Rundberg Ln, Suite H-4 Austin, Texas 78753 (800) 829-1040 (Individual) or (800) 829-4933 (Business) or (800) 829-4059 (TTY) www.irs.ustreas.gov Employment Taxes Social Security Administration 1029 Camino La Costa Austin, Texas 78752 (512) 916-5404 or (800) 325-0778 or (512) 206-3700 (TTY) www.ssa.gov State Taxes Business Taxes The comptroller of public accounts is charged with the administration and collection of state and local sales tax from businesses operating in Texas and also collects any franchise taxes owed by Texas corporations. There is no state income tax in Texas. The comptroller maintains field offices in most major Texas cities to provide assistance and aid in complying with tax regulations. For further information on these taxes, contact: Comptroller of Public Accounts P.O. Box 13528 Capital Station Austin, Texas 78711 111 E. 17th St. Austin, Texas 78774 (512) 463-4600 or (800) 252-5555 www.cpa.state.tx.us The permits required for taxes collected by the comptroller are defined and outlined in the section titled "Alphabetical Listing of Business Licenses and Permits" at http://www.texasonline.com/category.jsp?language=eng&categoryId=9.1 16
  17. 17. Employment Taxes The Texas Workforce Commission collects all unemployment taxes for workers employed in Texas. For information regarding these taxes, to obtain a state employer’s identification number or for information on tax credits, contact: Texas Workforce Commission Tax Department 101 E. 15th St. Austin, Texas 78778 www.twc.state.tx.us New Employer Accounts/Status of Accounts (512) 463-2731 or (800) 832-9394 Tax Rates (512) 463-2887 Unemployment Insurance Customer Service (800) 939-6631 Labor Market Information (512) 491-4922 Work Opportunity Tax Credit (800) 695-6879 Local Taxes Business Taxes If the business owns tangible personal property that is used to produce income, the property must be reported on a rendition form to the local county appraisal district after January 1 and no later than March 31 each year. Business owners must report all inventories, equipment and machinery. For additional information, contact the local county appraisal district. See the government pages of your local telephone directory for telephone numbers. 17
  18. 18. REFERENCES AND RESOURCES Information contained in this business plan proposal package was taken from: Haslett, B. and L.E. Smollen, Preparing a Business Plan, in Pratt’s Guide to Venture Capital (10th edition). Markham, J. and R. Sundergill, Business Plan Outline. Published by Campaign for Human Development. Texas Department of Economic Development. Texas Road Map to Starting a Business. Fourth Edition, February 1999. There is an abundance of other information available. We haven’t listed all of the sources here, but we may be able to provide you with additional help if you call us. Owning and operating a small business can be rewarding but will be a lot of hard work. We wish you success. If you need additional help in assembling information for your business plan, we suggest the following: Texas Department of Agriculture Call us toll free at (877) 428-7848, or check out our Web site at www.agr.state.tx.us. Our publication “A Bright Future for Rural Communities: A Guide to Economic Development” is available in print or on-line, and Appendix A of the Bright Future Guide contains an extensive list of agencies and organizations to contact for help. 18
  19. 19. SMALL BUSINESS DEVELOPMENT CENTERS (SBDC) Texas Small Business Development Centers work with existing and startup small companies to help them grow and compete in today’s global economy. SBDCs are available for small companies in every phase of the business life cycle, providing management expertise and objectivity to help entrepreneurs make sound decisions and succeed. The SBDC regional offices are listed below. There are also field centers located across the state. Call us at (877) 428-7848 for assistance in locating the office nearest you. Lubbock District Office Harlingen District Office 1205 Texas Ave. 222 E. Van Buren St., Suite 500 Room 408 Harlingen, Texas 78550 Lubbock, Texas 79401-2693 (956) 427-8533 (806) 472-7462 Fax (806) 472-7487 Corpus Christi Branch Office 3649 Leopard St., Suite 411 El Paso District Office Corpus Christi, Texas 78408 10737 Gateway West (361) 879-0017 El Paso, Texas 79935 (915) 633-7001 Dallas District Office Fax (915) 633-7005 4300 Amon Carter Blvd., Suite 114 Fort Worth, Texas 76155 San Antonio District Office (817) 684-5500 17319 San Pedro, Suite 200 Fax (817) 684-5516 San Antonio, Texas 78232-1411 (210) 403-5900 Fax (210) 403-5936 TTY (210) 403-5933 Houston District Office 8701 S. Gessner Drive, Suite 1200 Houston, Texas 77074 (713) 773-6500 Fax (713) 773-6550 19
  20. 20. SMALL BUSINESS ADMINISTRATION (SBA) The U.S. Small Business Administration provides financial, technical and management assistance to help Americans start, run and grow their businesses. With a portfolio of business loans, loan guarantees and disaster loans worth more than $45 billion, SBA is the nation's largest single financial backer of small businesses. 4300 Amon Carter Boulevard Suite 108 Fort Worth, Texas 76155 Telephone: (817) 684-5581 Fax: (817) 684-5588 TTY: (817) 684-5552 www.sba.gov 19
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  22. 22. APPENDIX A: BUSINESS PLAN WORKSHEETS The electronic version of these appendices can be completed using Microsoft Word
  23. 23. COVER SHEET Business:       Mailing Address:       Physical Address:       City, State, Zip:       County:       Telephone:       Fax:       E-Mail Address:       Web site Address:       Principals and Phone       Numbers:                                     Contact:       BUSINESS PROPOSAL PREPARED BY:       Phone Number:      
  24. 24. BUSINESS & INDUSTRY DESCRIPTION WORKSHEET I Business description:       Primary Region of Operation:       Potential customers or distribution channels: 1.       2.       3.       4.       5.      
  25. 25. WORKSHEET I (continued) Page 2 For expansion - Financial Performance (for last three years): Year                   Sales                   Gross Profits                   Net Profits before                   Taxes and Depreciation If losses occurred, explain:       Preventative measures taken and outcome:       Major industry participants:       How are they performing?       Companies entering or leaving market:       Type of legal structure:      
  26. 26. PRODUCT OR SERVICE DESCRIPTION WORKSHEET II Give a detailed description of the product and/or service offered (attach any patents or copyrights granted):       List raw materials and supplied products to be used, in what quantities, at what cost, and from whom purchased: Materials/Products Quantity Cost Supplier                                                                                                                         Identify any similarities/differences between your product and those of your major competitors: Similarities:       Differences:      
  27. 27. WORKSHEET II (continued) Page 2 Explain how these similarities/differences will benefit your agribusiness or small business:      
  28. 28. MARKET DESCRIPTION WORKSHEET III MARKET SIZE Estimate the size of your market in both units and dollars:       Describe the growth potential of the market for your product. What type of growth potential is seen for the industry?       Market size in terms of dollars:       Local       Regional       National       International Who makes up your market (check the appropriate box)? Consumers only Manufacturers Other (specify) Institutions Government        Discuss the growth potential for the industry:      
  29. 29. WORKSHEET III (continued) Page 2 Target market description:       Major Purchases Location                                                 Discuss the impact of price, quality, service, personal contacts and political constraints on buying decisions:       Discuss the importance of product/service seasonality:      
  30. 30. WORKSHEET III (continued) Page 3 How do you intend to attract and keep your target market?       Identify the competitors’ strengths and weaknesses:       Identify your largest competitors: 1.       2.       3.       4.       5.      
  31. 31. WORKSHEET III (continued) Page 4 Discuss how your product compares to your competitors based on service, price, performance, warranties, etc.:       List trends in sales, market share and profitability:       List recent entries into the market (who and when):       Recent exits from the market (who and when):      
  32. 32. WORKSHEET III (continued) Page 5 Discuss the current and projected industry sales and profit trends:       At what stage of the product and/or service life cycle will your business be entering? Explain: New       Growth       Maturity       Saturation       Decline       MARKET SHARE DATA What is the estimated percentage of the total market sales volume and market share you plan to capture? Year 1 Year 2 Year 3 Sales Volume                   Percentage                   Explain how you plan to capture the market share stated above:       How will you get your product to your customers?      
  33. 33. MARKETING PLAN WORKSHEET IV PRICING STRATEGY What are your sales and services polices?       Discuss the type of pricing strategy to be used:       Discuss/compare your pricing strategy with those of your major competitors:      
  34. 34. WORKSHEET IV (continued) Page 2 SALES/DISTRIBUTION STRATEGY Method of selling and distributing product:       PROMOTION STRATEGY Method of product promotion:       Briefly describe the advertising techniques chosen for your product (radio, tv, mail, Internet, etc):      
  35. 35. WORKSHEET IV (continued) Page 3 MARKETING STRATEGY Discuss which customers will be targeted and why:       Method of identifying and contacting potential customers:       SERVICE AND WARRANTY POLICIES Briefly describe what type of service/warranty policy, if any, your company will offer:      
  36. 36. MANUFACTURING AND OPERATIONS PLAN WORKSHEET V Describe the manufacturing process involved:       Space requirements and type of facilities needed:       Capital equipment needed:       Labor force needed:       For a Processing Business: Discuss the purchasing, inventory control and production control policies you plan to use:      
  37. 37. WORKSHEET V (continued) Page 2 FACILITIES AND IMPROVEMENTS For an Existing Business Describe the existing facilities:       Discuss your plans to improve/expand plant space:       To improve facilities, discuss what equipment is needed, at what cost and when it will be purchased:       For a Start-Up: Discuss facility acquisition:      
  38. 38. WORKSHEET V (continued) Page 3 PLANT LOCATION Business location description (attach map):       Discuss advantages/disadvantages of your business location in terms of wages, labor availability, proximity to customers and suppliers, access to transportation, taxes, utilities, zoning and any incentives offered by the city and/or county:       List any Federal/State taxes and regulations:
  39. 39.      WORKSHEET V (continued) Page 4 Describe the labor market in the area:       LABOR FORCE Year 1 Year 2 Full-time jobs created:             Part-time jobs created:             Discuss the training that will be offered and the length of time that it will be offered:       MANAGEMENT TEAM List the key members of the management team and their duties below: Key Members Duties                                                                        
  40. 40. WORKSHEET V (continued) Page 5 Describe the organizational structure of your company (attach a chart if available):       Board of Directors: Name Address Telephone                                                                                                                              
  41. 41. WORKSHEET V (continued) Page 6 INSURANCE Type:       Issuing Company:       Expiration Date:       Coverage Amount:       Deductible:       Type:       Issuing Company:       Expiration Date:       Coverage Amount:       Deductible:       Type:       Issuing Company:       Expiration Date:       Coverage Amount:       Deductible:       Will there be a “key member” life insurance policy on essential personnel?      
  42. 42. APPENDIX B: FINANCE WORKSHEETS 41
  43. 43. SOURCE OF FUNDS WORKSHEET I DESIRED FINANCING List the amount requested and the sources of financing: $            $            $            $            Stock: Type sold and unit price:       Total issuance:       Identify the uses of the funds and the amount: Land $      Building $      Equipment $      _____ Improvements $      Inventory $      Working Capital $      Product Development $      Marketing $      Other $      TOTAL AMOUNT NEEDED: $      Equity contributed to project: $     
  44. 44. BALANCE SHEET FORECAST WORKSHEET II      (AS OF DATE) ASSETS Current assets: Cash on hand and in banks: $      Accounts receivable- Trade $      Less reserve for bad debts $      Inventories $      Notes receivable – Current Portion $      Prepayment of expenses $      TOTAL CURRENT ASSETS $      Plant and Equipment Land $      Building $      Equipment $      Furniture and Fixtures $      Vehicles $      Less allowance for depreciation $      Other Assets: Organizational Costs $      Less Amortization $      Notes Receivable – Long Term $      TOTAL ASSETS: $      LIABILITIES Current liabilities: Current maturities of long-term debt $      Notes payable $      Accounts payable $      Taxes payable $      Other payables $      TOTAL CURRENT LIABILITIES $      Long-term debt (Net of Current Maturities) $      TOTAL LIABILITIES $      CAPITAL Capital stock $      Retained Earnings $      Current Profit (Loss) $      TOTAL CAPITAL OR NET WORTH $      TOTAL LIABILITIES AND CAPITAL $     
  45. 45. BREAK-EVEN ANALYSIS Fixed costs, incurred after the decision to enter into a business activity is made, are not directly related to the level of production. Fixed costs include, but are not limited to, depreciation on equipment, interest costs, taxes and general overhead expenses. Total fixed costs are the sum of the fixed costs. Variable costs change in direct relation to volume of output. They may include cost of goods sold or production expenses such as labor and power costs, feed, fuel, veterinary, irrigation and other expenses directly related to the production of a commodity or investment in a capital asset. Total variable costs (TVC) are the sum of the variable costs for the specified level of production or output. Average variable costs are the variable costs per unit of output or of TVC divided by units of output. Total fixed costs are shown in Figure 1 by the broken horizontal line. Total fixed costs do not change as the level of production increases. Total variable costs of production are indicated by the broken line sloping upward, which illustrates that total variable costs increase directly as production increases. The total cost line is the sum of the total fixed costs and total variable costs. The total cost line parallels the total variable cost line, but it begins at the level of the total fixed cost line. The total income line is the gross value of the output. This is shown as a dotted line, starting at the lower left of the graph and slanting upward. At any point, the total income line is equivalent to the number of units produced multiplied by the price per unit. The key point (break-even point) is the intersection of the total cost line and the total income line (Point P). A vertical line down from this point shows the level of production necessary to cover all costs. Production greater than this level generates positive revenue; losses are incurred at lower levels of production. FIGURE 1
  46. 46. Break-even Analysis Form WORKSHEET III 18 16 14 Cost and/or return $ 12 10 8 6 4 2 0 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 Unit of Output
  47. 47. FINANCE WORKSHEETS WORKSHEET IV PRO FORMA COMPANY NAME:       MONTHLY INCOME STATEMENT YEAR 1, PAGE 1 MONTHS 1 - 6 1 2 3 4 5 6 SUBTOTAL SALES                                                                                                                                                                         TOTAL SALES                                           COST OF GOODS                                                                                                                                                                                                                                                             TOTAL COST                                           OF GOODS GROSS PROFIT Operating Expenses Salaries                                           Payroll Taxes                                           Rent                                           Lease                                           Utilities                                           Office Supplies                                           Insurance                                           Travel                                           Repairs/                                           Maintenance Telephone                                           Depreciation                                           Advertising                                           Misc.                                           Interest                                           TOTAL OPERATING EXPENSES                                                                                     PROFIT/(LOSS)                                           BEFORE TAXES                                          
  48. 48. PRO FORMA MONTHLY INCOME STATEMENT YEAR 1, PAGE 2 MONTHS 7-12 7 8 9 10 11 12 SUBTOTAL SALES                                                                                                                                           TOTAL SALES                                           COST OF GOODS                                                                                                                                                                                                                                           TOTAL COST                                           OF GOODS GROSS PROFIT Operating Expenses Salaries                                           Payroll Taxes                                           Rent                                           Lease                                           Utilities                                           Office Supplies                                           Insurance                                           Travel                                           Repairs/                                           Maintenance Telephone                                           Depreciation                                           Advertising                                           Misc.                                           Interest                                           TOTAL OPERATING EXPENSES                                           PROFIT(LOSS) BEFORE TAXES                                          
  49. 49. PRO FORMA COMPANY NAME:       YEARLY INCOME STATEMENT YEARS 2 AND 3 YEAR 2 % YEAR 3 % Change Change SALES                                                                                           TOTAL SALES                         COST OF GOODS                                                                                                                                                       TOTAL COST OF GOODS                         GROSS PROFIT Operating Expenses Salaries                         Payroll Taxes                         Rent                         Lease                         Utilities                         Office Supplies                         Insurance                         Travel                         Repairs/                         Maintenance Telephone                         Depreciation                         Advertising                         Misc.                         Interest                         TOTAL OPERATING                         EXPENSES PROFIT(LOSS) BEFORE TAXES
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  51. 51. FINANCE WORKSHEETS WORKSHEET V PRO FORMA COMPANY NAME:       MONTHLY CASH FLOW YEAR 1, PAGE 1 MONTHS 1 - 6 1 2 3 4 5 6 SUBTOTAL BEGINNING CASH (A) Cash Receipts                                           Cash Sales                                           Collections from                                           credit accounts Loans or other cash                                           injections TOTAL CASH RECEIPTS                                           (B) TOTAL CASH AVAILABLE (A + B)                                           CASH PAID OUT Cost of Goods                                           Salaries                                           Payroll Taxes                                           Rent                                           Lease                                           Utilities                                           Office Supplies                                           Insurance                                           Repairs/Maintenance                                           Travel                                           Interest                                           Telephone                                           Advertising                                           Miscellaneous                                           TOTAL OPERATING EXPENSES (C)                                           CAPITAL EXPENSES Principal On Loan                                           Capital Purchases                                           Owner's Withdrawal                                           Other                                           TOTAL CAPITAL EXPENSES (D) TOTAL PAID OUT                                           (C + D) ENDING CASH [ (A+B) - (C+D) ]                                           COMPANY NAME: PRO FORMA MONTHLY CASH FLOW
  52. 52. YEAR 1, PAGE 2 MONTHS 7-12 7 8 9 10 11 12 SUB TOTAL BEGINNING CASH (A) Cash Receipts                                           Cash Sales                                           Collections from                                           credit accounts                                           Loans or other cash                                           injections                                           TOTAL CASH RECEIPTS                                           (B) TOTAL CASH AVAILABLE (A + B) CASH PAID OUT Cost of Goods                                           Salaries                                           Payroll Taxes                                           Rent                                           Lease                                           Utilities                                           Office Supplies                                           Insurance                                           Repairs/Maintenance                                           Travel                                           Interest                                           Telephone                                           Advertising                                           Miscellaneous                                           TOTAL OPERATING EXPENSES (C) CAPITAL EXPENSES Principal On Loan                                           Capital Purchases                                           Owner's Withdrawal                                           Other                                           TOTAL CAPITAL EXPENSES (D) TOTAL PAID OUT (C + D)                                           ENDING CASH [ (A+B) - (C+D) ]                                          
  53. 53. PRO FORMA COMPANY NAME: MONTHLY CASH FLOW YEARS 2 AND 3 YEAR 2 % YEAR 3 % Change Change BEGINNING CASH (A) Cash Receipts                   Cash Sales                   Collections from                   credit accounts                   Loans or other cash                   injections                   TOTAL INCOME (B) TOTAL CASH AVAILABLE (A + B) CASH PAID OUT Cost of Goods                         Salaries                         Payroll Taxes                         Rent                         Lease                         Utilities                         Office Supplies                         Insurance                         Repairs/Maintenance                         Travel                         Interest                         Telephone                         Advertising                         Miscellaneous                         TOTAL OPERATING EXPENSES (C) CAPITAL EXPENSES Principal On Loan                         Capital Purchases                         Owner's Withdrawal                         Other                         TOTAL CAPITAL EXPENSES (D) TOTAL PAID OUT                         (C + D) ENDING CASH [(A + B) - (C + D)]                        
  54. 54. SCHEDULE OF LIABILITIES WORKSHEET VI ORIGINAL PAYMENT ORIGINAL PRESENT INTEREST COLLATERAL MARKET NOTE AMOUNT/ CREDITOR AMOUNT BALANCE RATE FOR LOAN VALUE DATE TERMS SCHEDULE OF COLLATERAL MARKET COLLATERAL DESCRIPTION LIENHOLDER VALUE
  55. 55. PERSONAL BALANCE SHEET WORKSHEET VII (AS OF DATE) CURRENT ASSETS Current assets: Cash on hand and in banks: $ Accounts receivable- Notes receivable – Current Portion TOTAL CURRENT ASSETS $ OTHER ASSETS Household Goods Automobiles Retirement Accounts TOTAL ASSETS: $ LIABILITIES Monthly Payment Credit cards Notes payable Accounts payable Taxes payable Other payables TOTAL LIABILITIES $ NET WORTH $
  56. 56. PERSONAL BALANCE SHEET WORKSHEET VII (continued) Page 2 PERSONAL MONTHLY CASH FLOW Cash In Monthly income $ Other Total Cash In (A) $ Cash Out Mortgage or Rent Utilities Food and Consumables Other Payments Other Total Cash Out (B) $ Ending Cash (A - B) $
  57. 57. PERSONAL BALANCE SHEET WORKSHEET VII (continued) Page 3 SCHEDULE OF PERSONAL LIABILITIES ORIGINAL PAYMENT ORIGINAL PRESENT INTEREST COLLATERAL MARKET NOTE AMOUNT/ CREDITOR AMOUNT BALANCE RATE FOR LOAN VALUE DATE TERMS
  58. 58. APPENDIX C: TAX REFERENCE TABLE
  59. 59. TAX REFERENCE TABLE The table below provides additional information concerning income, employment, and business taxes. The table outlines the federal, state and local (i.e., property) tax requirements for each type of business entity. The reference also indicates which forms are required, the purpose of the taxes, and when and where to file the taxes and reports. The table was downloaded from the Governor’s Office, Economic Development and Tourism Division Web site. TYPE OF BUSINESS FORMS ENTITY REQUIRED PURPOSE WHEN TO FILE WHERE TO FILE INCOME TAXES - Federal Only Sole Proprietor Form 1040 Report taxable income: 15th day of the Internal Revenue Schedule C Schedule included in fourth month Service individual income tax after the end of Austin, TX 73301 return the fiscal year Partnership Form 1065 Report taxable income: 15th day of the Internal Revenue K-1 from the return to fourth month Service each partner to use for after the end of Austin, TX 73301 reporting on his or her the fiscal year individual tax return (Information return only); any taxes due are paid individually by partner Corporation Form 1120 Report taxable income 15th day of the Internal Revenue third month after Service the end of the Austin, TX 73301 fiscal year Corporation Form 1120S Report taxable income: 15th day of the Internal Revenue K-1 from the return to third month after Service each shareholder to use the end of the Austin, TX 73301 for reporting on his or her fiscal year individual tax return (Information return only); any taxes due are paid individually by share holder EMPLOYMENT TAXES Quarterly Tax Form 1040 May be required if not Generally April Internal Revenue Estimates: Sole ES withheld through wage 15, June 15 and Service Proprietor source during current tax Sept 15 of P.O. Box 970001 Partnership year current tax year St. Louis, MO and Jan 15 of 63197 the following year Regular C Federal Tax Must estimate current Quarterly, 15th No filing - Must
  60. 60. Corporation Deposit earnings and pay day of the 4th, deposit at Coupon quarterly 6th, 9th and 12th authorized month of the commercial bank current fiscal on or before 2 PM year Payroll Taxes - Form 940 Federal unemployment Annually, Internal Revenue Federal, State and tax January 31 Service Local: For all Austin, TX 73301 entities (sole Form 941 Social Security and Quarterly, due Internal Revenue proprietor, withholding income tax one month after Service partnership, the calendar Austin, TX 73301 corporation) quarter ends Form W-2, Withholding information Employee’s copy To respective W-3 statement January 31 employee Federal copy Social Security last day of Admin. February Albuquerque Data Operations Center Albuquerque, NM 87180 Form W-4, Employee records Required to be I-9 on file Form TWC State unemployment tax - Quarterly Texas Workforce C-3, C-4 payroll taxes are required Commission TWC Status if you have at least one Cashier P.O. Box Report employee 14907 Austin, TX 78714 Payroll Taxes - Form 1042, Withholding for U.S. Annually, March Internal Revenue Non resident alien 1042-S Source Income of foreign 15 of the year Service persons following Philadelphia, PA 19255 Statement to Foreign person’s U.S. Copy to payee To recipient Payee (can Source Income subject to by March 15 use 1047-S) withholding Independent Form 1099 Information returns - Copy to recipient To recipient Contractor and various payments to January 31 Other Non- individuals of $600 or employee more, including prizes, Payments: For all awards and other entities (sole business payments proprietor, Form 1096 Federal copy Internal Revenue partnership, last day of Service corporation) February Austin, TX 73301

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